Resistance is a price level where selling interest is strong enough to prevent further price advance. At resistance, supply exceeds demand—sellers step in, capping the rally. Resistance levels are used for setting profit targets, timing shorts, and identifying breakout points when levels are overcome.
- Price level where selling prevents further advance
- More tests of resistance = stronger level
- Broken resistance often becomes support
How Resistance Works
Resistance forms where sellers accumulate:
Resistance Formation:
Price History at ₹150:
- Oct: Price rallied to ₹150, reversed to ₹135
- Nov: Price rallied to ₹148, reversed to ₹130
- Dec: Price rallied to ₹150 again, reversed to ₹138
- Jan: Price approaching ₹150 again...
Why ₹150 is Resistance:
- Previous buyers at ₹150 are now eager to break even
- Sellers see ₹150 as expensive
- Trapped longs sell when they can escape
- Supply exceeds demand at this level
Result: ₹150 is established resistance
Quick Reference: Types of Resistance
| Resistance Type | Identification | Strength |
|---|---|---|
| Horizontal | Prior swing highs | Strong with multiple tests |
| Moving Average | 50 or 200 MA in downtrend | Dynamic resistance |
| Trendline | Downward sloping line | Valid while downtrend intact |
| Fibonacci | 38.2%, 50%, 61.8% in downtrend | Stronger with confluence |
| Round Numbers | ₹100, ₹500, ₹1000 | Psychological barriers |
Example: Trading Resistance
Resistance Rejection Trade:
| Day | Price | Resistance | Action |
|---|---|---|---|
| 1 | ₹135 | ₹150 | Watching |
| 3 | ₹142 | ₹150 | Approaching resistance |
| 5 | ₹149 | ₹150 | At resistance! |
| 5 | ₹148 | ₹150 | Bearish candle forms, SELL |
| 6 | ₹143 | ₹150 | Rejecting |
| 10 | ₹132 | ₹150 | Resistance held! |
Stop: Above ₹152 (just above resistance) Target: Previous low at ₹128
Resistance is a price level where selling interest prevents further advance. Price tends to reverse from resistance. The more times a level rejects price, the stronger the resistance. When resistance breaks, it often becomes support.
Identifying Strong Resistance
Multiple Tests
Resistance that has rejected price 3+ times is stronger than single rejection.
Volume
High volume at resistance with reversal suggests strong selling interest.
Timeframe
Resistance on higher timeframes (daily, weekly) is stronger than intraday levels.
Confluence
Resistance that aligns with moving average, Fibonacci, or trendline is stronger.
Resistance Trading Strategies
Sell the Rejection
Enter short when price reaches resistance and shows bearish reversal pattern. Stop above resistance.
Breakout Trading
Buy when price breaks above resistance with strong volume. Old resistance becomes support.
Profit Taking
Use resistance levels above to take profits on long positions.
Wait and See
At resistance, reduce position size until direction clarifies.
When Resistance Breaks
Role Reversal
Broken resistance becomes support. Previous ceiling becomes floor.
Confirmation
Wait for retest of broken resistance (now support) to confirm breakout.
Breakout Entry
Enter long on breakout or on retest of the breakout level.
Common Mistakes
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Shorting strong momentum at resistance – Strong trends can break through. Wait for rejection.
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Tight stops at resistance – Give some room; resistance is a zone, not exact price.
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Missing breakouts – Don’t assume resistance will hold forever. Watch for breakout signs.
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Ignoring failed resistance – Once broken, the level flips. Adjust your bias.
How JournalPlus Tracks Resistance
JournalPlus logs resistance levels at entry and exit, tracking whether your resistance-based trades (shorts, breakouts, profit-taking) are successful.
